Narendra Modi won and lost India’s general election.

His Baharatiya Janata Party (BJP) lost its absolute majority in parliament. But with the help of 23 smaller parties has cobbled together a working coalition.

But more importantly, the BJP lost big in the expectation stakes. Modi’s party was predicted to romp home with 400-plus seats. This would have given the BJP the super majority it needed to complete the transformation of India from the world’s largest democracy to an autocratic Hindu nationalist nation.

As it is the BJP dropped from 303 to 240 seats. And, to add insult to injury, some of its biggest losses were in the BJP heartland of Uttar Pradesh.

Modi faces additional problems. A big chunk of his new coalition partners are secularists. They do not share his Hindu nationalist vision. This will make it difficult for 73-year-old Narendra Modi to achieve his goals in what is almost certain to be his third and final term as prime minister. And because Modi has stooped to cult politics to realise his ambitions, there is no BJP successor in sight.

Modi’s failed expectations has several causes. As usual, economic is near or at the top of the list. At a macro level India looks fantastic. GDP growth is an astonishing 8.4 percent a year.  There are 200 Indian billionaires, putting the sub-continent third behind the US and China. But trickledown economics have failed in India just like everywhere else. Twenty-two percent of Indians live below the world poverty line. The per capita income is $2,023 a year.

The number and quality of India’s higher education institutions has dramatically increased from 723 in 2014 to 1,113 in 2023. But so has youth unemployment figure at 23.22 percent. Many of the young people brandishing impressive university degrees have been forced to return to the countryside and poor paying agricultural jobs. So yes, there is a growing national pride. But its benefits are diluted by growing inequalities.

Another problem is the caste system which has inflicted Indian society for centuries. The British colonials imposed an affirmative action programme which was later enshrined in the Indian constitution. This provided a guaranteed quota in parliament, jobs, education and other sectors for the Dalits (untouchables), other low castes and minorities such as Christians, Muslims and Anglo-Indians.

The problem was that no one knew for certain the size of the pool of Dalits in order to calculate a reasonable quota. This is because that there had been no caste census since before independence in 1947. Last September, however, there was just such a census in the Bihar state. It revealed that the size of the Dalit caste was much larger – and thus more of a problem – than expected.

This has resulted in a call for a nationwide caste census and increased constitutional protection for the lower castes and minority groups. Such a move would put the BJP’s Hindu nationalism in a collision course with the Dalits who – up until this election – were Modi supporters.

There are other areas of concern. Modi has elevated himself to the status of political demi-god. This has helped to secure his base but failed to broaden it as Indians fear the threat that cult politics has on their proud democratic traditions.

The threat is real. To reinforce his increasingly centralised foundations, Modi has introduced crony capitalism and significantly curbed freedom of press and speech. Journalists, politicians and academics who dare to criticise the Indian prime minister find themselves unemployed, harassed by the tax authorities or, in some cases, behind bars. The BBC’s offices were raided by tax authorities after it broadcast a programme critical of Modi.

The opposition Congress Party fared much worse. Last year its dynastic leader Rahul Gandhi was convicted of defamation by a court in Modi’s home state of Gujarat. The conviction carried a two-year jail sentence and a bar on contesting any elected office. It required an international outcry before the Indian Supreme Court threw out the conviction.

But Modi did not stop there. Shortly before the election, two chief ministers belonging to the Congress Party were jailed and the party’s bank accounts were frozen by the tax authorities.

Most political pundits expected that the compounding problems would crush Congress at the polls. But the INDIAN Alliance which Congress leads won 230 seats. Gandhi declared the result “a moral and political defeat for Mr. Modi.”

It is too early to say for certain, but momentum appears to have shifted to Gandhi and the Congress party. The coming year will be an important barometer. Swathes of political power are devolved to the state governments. Over the next 14 months there will be five important state elections.

The condition of India’s democracy is important to the world. The sub-continent is neck and neck with China in population size. It will soon overtake Japan as the world’s third largest economy. According to Global Firepower its military establishment is the third largest in the world after the US and China. It is a nuclear power. As a member of the Quadrilateral Security Dialogue (along with the US, Japan and Australia), India plays an important role in containing and countering growing Chinese influence in the Asia-Pacific region.

It is vitally important that India’s political institutions have more in common with western democracies than with the autocracies of Moscow and Beijing. Certainly, India’s claim to the title of “The World’s largest democracy” was looking a bit dubious – until this week.

* Tom Arms is foreign editor of Liberal Democrat Voice and author of “The Encyclopaedia of the Cold War” and “America Made in Britain".